Air France KLM, Delta in joint venture

May 20, 2009

, PARIS, May 20 – Air France-KLM and its US partner Delta Airlines said on Wednesday they planned to launch a new joint venture to operate transatlantic flights and to share costs and revenue.

The deal would extend an earlier cooperation agreement worked out in March 2008 by including routes operated by KLM, a Dutch carrier, and Northwest Airlines of the United States, which merged with US rival Delta last year.

The new arrangement, to be signed on Wednesday, would cover routes between the United States and Europe, Amsterdam and India, and North America and Tahiti in the Pacific, the two carriers said.

The new venture would account for cover about 25 percent of the transatlantic market and is "an essential element to competition with the two other major alliances active" in the sector, a joint statement said.

The competing tie-ups are Star Alliance, grouped around Germany\’s Lufthansa, and OneWorld, of which British Airways is the principal player.

The new Air France-KLM-Delta alliance would have annual sales of around 12 billion dollars (9.3 billion euros) and offer more than 200 transatlantic flights, or 50,000 seats, a day, according to the statement.

Delta Airlines is the world\’s largest carrier in terms of traffic while Air France-KLM is number one in Europe.

The Franco-Dutch company said Tuesday it suffered a loss of 814 million euros (1.1 billion dollars) in the 2008-2009 fiscal year and would have to cut around 3,000 jobs. Air France-KLM employs 104,000 people worldwide.

But the company\’s operating loss, at 129 million euros, turned out to be less severe than the 204 million euros forecast by analysts.

As a result, Air France-KLM shares rose more than 15 percent in early trade to 11.12 euros on an overall Paris market that was 0.43 percent stronger.

"Air France-KLM predicts that the macroeconomic environment in the first half of the year will remain uncertain and difficult" while the second half should see "some signs of stabilisation," analysts at CM-CIC Securities said.

"We believe that the more positive market sentiment regarding the aviation sector should continue and even strengthen by the end of the year," they added.

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